INTRODUCTION TO BUISNESS: BUISNESS ETHNICS

Ethical and Legal Behavior

Ethics and Laws
® Ethical behavior or ethics are a set of standards that govern the
conduct of a person, especially a member of a profession.
® Legal behavior follows the laws, which may change over time.

Business Ethics
What is business ethics?
® Business ethics refers to contemporary standards or values that
govern the actions and behavior of individuals in the business
organization and the actions of the business as a whole
Code of Ethics
® Corporations and professional organizations, particularly licensing
boards, will usually have a written “Code of Ethics” that governs
standards of professional conduct expected of all in the field.
Company Codes of Ethics and Codes of Practice
® A Corporate Code of Ethics begins by setting out the values that
underpin the code that describes a company's obligation to its
stakeholders. The code is publicly available, details how the company
plans to implement its values and vision, and contains guidance on
ethical standards and how to achieve them.
® A Code of Practice is adopted by a profession or a government or
nongovernmental organization to regulate that profession. In a
membership context, failure to comply with a code of practice can
result in expulsion from the professional organization.
® Beyond establishing policies or codes that guide the ethical behavior,
many companies are assessing the environmental factors that can lead
employees to engage in unethical conduct. A competitive business
environment may call for unethical behavior.
Encouraging Ethical Behavior
® Beyond written codes of ethics, organizations have unique cultures—
ways of doing things that evolve through shared values and beliefs.
Subordinates look to their supervisors as role models of ethical
behavior.
Five Strategies to Promote Safer and more Ethical Workplaces
Five Strategies suggested by the Ethics and Compliance Initiative (ECI)
1. Make ethics a leadership priority
2. Focus on achieving success the right way
3. Be attuned to the impact of organizational change
4. Nurture a speak up culture
5. Be transparent

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The Role of Executives and Managers in Setting Ethical Standards
® When executives establish specific, measurable objectives for the
company, those objectives determine where people will focus their time
and effort. When the objectives cannot be met and there are dire
personal consequences for failure, these conditions can lead to the
compromise of ethics and standards.
® Executives play an important role in creating company policies on
ethics—and by visibly following and upholding them. Employees look to
executives to decide whether standards-of-business-conduct policies
should be observed and respected.
® Internal promotions send very strong signals about what is important to
a company. If the company promotes individuals to management
positions when they have displayed questionable ethics in the
workplace
® it creates a level of managers who are more likely to
encourage their employees to achieve business results at
any cost, even when ethics are compromised
® it sends a message to all employees that business results
are more important than ethics.

Ethical Challenges
Ethical Issues: Bribes
® Bribery is the act of giving money, goods, or other forms of
compensation to a recipient in exchange for an alteration of their
behavior (to the benefit/interest of the giver) that the recipient would
otherwise not alter.
® A kickback is a form of negotiated bribery in which a commission is
paid to the bribe-taker in exchange for services rendered.

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 Ethical Issues: Conflict of Interest
® Conflict of interest (COI) is an ethical challenge that occurs when an
individual or organization is involved in multiple interests that are at
odds with one another.
® Self-dealing: in which an official who controls an organization causes it
to enter into a transaction with the official, or with another
organization that benefits the official, i.e., the official is on both sides of
the “deal.”
® Outside employment: in which the interests of one job contradict
another.
® Family interests: in which a spouse, child, or other close relative is
employed (or applies for employment) or where goods or services are
purchased from such a relative or a firm controlled by a relative.
Abuse of this type of conflict of interest is called nepotism.
® Gifts from friends: who also do business with the person receiving the
gifts (may include non-tangible things of value such as transportation
and lodging).
Types of Conflict of Interest
® Self-dealing: in which an official who controls an organization causes it
to enter into a transaction with the official, or with another
organization that benefits the official, i.e., the official is on both sides of
the “deal.”
® Outside employment: in which the interests of one job contradict
another.
® Family interests: in which a spouse, child, or other close relative is
employed (or applies for employment) or where goods or services are
purchased from such a relative or a firm controlled by a relative. Abuse
of this type of conflict of interest is called nepotism.
® Gifts from friends: who also do business with the person receiving the
gifts (may include non-tangible things of value such as transportation
and lodging).

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Whistle-blower
® A whistleblower is a person who exposes information or activity that
is deemed illegal, unethical, or incorrect within an organization that is
either public or private.
® Whistleblowers take action to put an end to unethical practices after
witnessing injustices in their businesses or organizations

Corporate Social Responsibility

Corporate Social Responsibility (CSR)
® Corporate social responsibility is the ethical role of the corporation in
society
® It refers to actions that businesses take or refrain from taking based
on the impact of those actions on the external environment and
community
The Aim of Corporate Social Responsibility
® The aim of CSR is to increase long-term profits and shareholder trust
through positive public relations and high ethical standards to reduce
business and legal risk by taking responsibility for corporate actions.
® It isn’t enough for companies to generate a profit and merely meet the
letter of the law in their business operations. Today, many U.S. citizens
expect them to generate a profit and conduct themselves in an ethical
and socially responsible manner.
® CSR strategies encourage the company to make a positive impact on
the environment and stakeholders—that is, all of the parties who have a
stake in the performance and output of the corporation.
Growing Importance of CSR
® Areas of CSR include environmental concerns (green business),
poverty, human rights, and animal rights. Today, businesses are
realizing the importance of CSR in attracting and maintaining
employees and customers. Stakeholders are demanding that
businesses give back to the larger community in which they operate.

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Demands for Corporate Social Responsibility
Several drivers pushing businesses toward corporate social responsibility
include:
® Increased pressure from consumers: consumers are demanding more
from businesses that get their hard-earned cash. Businesses that are
perceived as valuing more than just the “bottom-line” are gaining
favor with the buying public.
® Pressure from shareholders and investors: Socially Responsible
Investing (SRI) has seen increased attention over the last several
decades.
® Supply-chain pressure: as consumers pay closer attention to the social
responsibility of retailers and service provider, visibility into their
supply chains has become a priority. For example, Apple has come
under scrutiny and criticism for the poor working conditions and
environmental hazards taking place at assembly facilities in China.
Examples of Corporate Social Responsibility
® Corporate philanthropy: a corporation's gifts to charitable
organizations.
® Cause-related marketing: corporations associating the sales of its
product to a program of donations or support for a charitable or civic
organization.
® Sustainability: a concept derived from environmentalism; it originally
referred to the ability of a society to or company to continue to
operate without compromising the planet’s environmental condition in
the future.
® Social Entrepreneurship and Social Enterprise: the use of business
organizations and techniques to attain laudable social goals.
® Social Marketing: the use of business marketing techniques in the
pursuit of social goals.

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Controversies Surrounding CSR
® From the beginning, CSR has been the subject of much debate. CSR’s
critics argue that the main responsibility of businesses is to maximize
return to their shareholders.
® Other critics assert that many so-called CSR activities are really just
publicity stunts and corporate “greenwashing.” Greenwashing refers to
corporations that exaggerate or misstate the impact of their
environmental actions or promote products as being “eco-friendly”
when in fact they’re not.
® Supporters of CSR contend that there are significant profit-related
benefits in socially responsible behavior. Companies are using their CSR
activities to recruit and keep the best management talent and to
establish partnerships with communities to increase company influence
on legislation.
® Despite the ongoing debate, trends indicate that CSR is gathering force
and is here to stay.